Banks accept results of critical inquiry

Author
Newstalk ZB with NZ Herald,
Section
Audio,
Publish Date
Monday, 5 November 2018, 5:46p.m.
New Zealand banks have been put under notice after the damaging report. (Photo / NZ Herald)

LISTEN TO ANTONY BUICK-CONSTABLE TALK WITH LARRY WILLIAMS ABOVE

New Zealand banks are working to address concern over pushy sales tactics.

A new report is calling for an to incentivising bank staff to sell more products like personal loans, credit cards and insurance.

Bankers Association chief executive Antony Buick-Constable told Larry Williams the industry has taken the criticisms on board.

" We're already going to act with real urgency to address these. Some of our banks are already removing things like sales targets and customer facing staff.'

The review, which covered 11 banks, also found significant weaknesses around governance and management.

Rob Everett, chief executive of the FMA said the governance of conduct risk - how boards oversee and monitor conduct issues in the banks - required "serious attention".

"Boards and senior management must address the recommendations and findings from our review with urgency."

Those recommendations include greater board ownership and accountability, prioritising the identification of issues and addressing them quickly, strengthening staff reporting channels, including whistleblower processes, and removing all incentives linked to sales measures as well as revising sales incentive structure for frontline sales people and through all layers of management.

Everett said despite it releasing a conduct guide in February 2017, some banks had only started to consider the issues now, with most of the initiatives not going far enough.

Reserve Bank governor Adrian Orr said banks had a responsibility ensure customers receive products and services they understand.

"These products and services must be suited to customers' needs on an ongoing basis.

Speaking to media in Wellington, Everett said this is the first time New Zealand's two regulators have worked together on this sort of scale.

He said there is much work still to do in managing conduct issues.

"In our view banks do little to monitor long-term customer outcomes," Everett said.

The risks of this are increased by sales incentives, which are typically focused on volume metrics.

All banks need to better manage their conduct around risk management, he said.

"Some backs have significant work to do in this [area.]"

He said there is a risk customers are not being served well.

The response to customer complaints was found to be more reactive, than proactive, Everett said.

Orr told a press conference that banks need to take this report seriously.

Orr said he expect banks to revise and implement any sales incentive they are currently using.

In terms of what's next, Orr said specific individual feedback will be given to each of the 11 banks surveyed in the report.

He said this is the "end of the beginning" in terms of banks revamping areas of their conduct.

The report confirm Orr's thinking that New Zealand's banking culture is not the same as what has found to be the issue in Australia.

He said it's complacency that is the issue in New Zealand.

The regulators were given all the information they asked for from the banks Everett said.

On sales incentives, Everett said the industry has already begun changing its position.

But if banks aren't willing to change, "our intention is to report on where that overall dynamic sits," he said.

This could mean naming and shaming banks that don't change their ways.

Orr said this report will be a "wake-up call" for banks, when it comes to sales incentives.

No banks scored "tremendously badly, or tremendously well" across all metrics of the report, Everett said.

"We have seen a mixed bag from the banks."

Orr said he was disappointed with how slow and reactive banks have been in this space.

"The light has been shone, and this is our best opportunity to make the most out of it," Orr said.

The review cost just over $2 million, Orr said.

In a statement, Commerce and Consumer Affairs Minister Kris Faafoi said banks must "lift their game to ensure the rights of customers are protected."

He said banks are "on notice".

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